do you know Loyalty Program Will it sell you the points or miles currency of its program with no strings attached?
You can go online, log into your account and Buy points or miles with a credit card All it takes is a few clicks. These plans often come with generous purchase limits, meaning you can top up your balance to six figures in a matter of minutes.
What’s the problem? Well, cost. The purchase price per point or mile is usually higher than TPG’s Valuation.
The good news is that the program runs regularly Promotions for buying points and milesDuring these promotions, you can often get points and miles for about half their normal cost, and sometimes even less than our valuation, which means you can redeem them for more value than they cost to purchase.
However, you may not want to buy points and miles even when they are on sale, so in this guide, I will discuss when it makes sense to buy points and miles.
When should you buy points and miles?
It makes sense to buy points and miles when the value you get from redeeming them is greater than the cost of purchasing them.
Let’s say you want to buy a ticket that costs $500 in cash, or 20,000 miles plus $50 in fees and taxes. If you can purchase those 20,000 miles at 1 cent per mile during an award promotion, the ticket you purchase with your purchased miles will only cost $250 (20,000 times $0.01 plus $50 in taxes), instead of the $500 for the standard cash fare.
That would be a great thing.
Therefore, I would keep an eye out for promotional offers that give you bonus miles when you purchase a minimum amount, or purchase at a discount. A good rule of thumb is that when the price per mile is lower than TPG’s valuation for that mile currency, there’s a good chance you can redeem for more value than the purchase cost.
Daily News
Reward your inbox with the TPG Daily newsletter
Join more than 700,000 readers and get breaking news, in-depth guides and exclusive offers from TPG experts
For example, Air Canada’s Aeroplan is my favorite Star Alliance loyalty program, if not my favorite global airline loyalty program. Aeroplan points are easy to earn and redeem With attractive partner redemption rates and a huge list of 50 airline partners, including Lufthansa, ANA, Emirates, Singapore Airlines and Cathay Pacific.
Based on our July 2024 data, TPG assigns a value of 1.5 cents per Aeroplan point ValuationI know I can easily trade them for at least this value, whether Flying Business Class to Europe with Air Canada or Fly to Africa with Ethiopian Airlines.
You can buy Aeroplan points for 3.5 bonus points per point (about 2.6 cents in the U.S.) At that price, it’s nearly a cent higher than our valuation, so as much as I like my Aeroplan points, I won’t be buying them.
However, the program occasionally offers bonus offers on point purchases, usually between 80% and 100%. A 100% bonus offer means that if I buy 50,000 points at 2.6 cents per point, I will get an additional 50,000 points for free. This means I’m buying points at 1.3 cents per point, which is an attractive offer.
Aviation Plan Recently offered a 125% bonus Buy Aeroplan points, bringing the cost down to about 1.14 cents per point (this offer has now ended, but check the current Purchase points and miles offers pagewhich we will update regularly).
The program typically only offers this bonus level once a year, so I jumped at the chance to buy a ton of Aeroplan points, but only because I knew I would eventually redeem them. If you don’t have a specific redemption plan or aren’t a frequent visitor to a particular program, TPG generally doesn’t recommend buying points or miles because devaluation is a regular occurrence, which makes it difficult to redeem points or miles. Hoarding a currency is a bad long-term investment.
Since I book a lot of flights through Aeroplan, I know I can easily redeem the points I purchase for at least as much as TPG’s valuation, if not more.
For example, I know that I can fly from Western Europe to the Eastern United States by Business Class 60,000 Aeroplan Points Points from partner airlines like Lufthansa and Swiss. By purchasing points at 1.14 cents each, I was able to fly across the Atlantic in business class for less than $700 in points, plus minimal taxes and fees. That’s a great deal.
But there are also precautions.
The above calculation assumes that you can redeem your miles for the ticket you want at the redemption rate quoted in the first quote. The first problem with this assumption is that redemption availability is constantly changing. When you consider buying points and miles, a seat that may be available today may not be available tomorrow.
For those plans that use dynamic pricing, the price for the same flight may change constantly.
related: How much does your vacation really cost? The scourge of dynamic pricing is spreading like wildfire
The second problem is that the number of points or miles you need may increase. Most programs occasionally raise requirements (called devaluation) and your loyalty currency will lose value. Some programs warn members before a change occurs, but programs can devalue overnight with little advance notice.
If you are confident that you can redeem your points or miles at a price that you are happy with, then it makes sense to buy them, but you shouldn’t hoard the currency for a rainy day.
It also makes sense when you are a few thousand points or miles away from a big redemption, e.g. Honeymoon First Class FlightEven if points or miles aren’t for sale, it makes sense to top up your account to make that coveted redemption.
related: How to decide whether to use cash or miles to buy your flight tickets
When shouldn’t I buy points or miles?
If it’s not cost-effective, you shouldn’t buy points or miles.
It’s good to remember that when you buy points or miles, you’ll need to pay the fees for the points or miles plus the taxes and fees associated with booking the award ticket. For example, Virgin Atlantic Flying Club During the standard (i.e., off-peak) season, a round-trip flight from New York to London costs just 20,000 points. But before you think you’ve successfully found a discounted one-way flight to London, you need to understand the cost structure of such tickets.
First, you have to pay a transaction fee to buy points. Then, when you book your flight, Virgin Atlantic charges a hefty fee. Surcharges and taxesIn this case, the taxes and fees alone may be more expensive than the cost of the points. You are better off paying the fare directly in cash.
There’s little point in buying points or miles if you don’t plan to redeem them right away — this is known as a “speculative purchase.” That’s because you have no guarantee of their value in the future when you decide to use them, due to depreciation and other ways that loyalty programs may change their programs.
related: Why points and miles aren’t a good long-term investment
Which credit card should you use to buy points and miles?
Most of these promotions are processed through Points.com, not directly by the hotel or airline, so you won’t receive most of the rewards. Travel Rewards CardsYou need to use Daily consumption card This provides a good return on non-bonus spending.
The main exception to this rule is American Airlines. The airline reportedly codes mileage purchases into tickets, so you may want to use a credit card that earns miles. Ticket Award Miles Buy AAdvantage miles to get the highest rewards.
If you are trying to achieve Minimum spending requirement To get the welcome bonus on a new card, using this card might be your best bet.
Keep in mind that you may Foreign exchange transaction fees On some cards, when purchasing points or miles from a foreign program, you may need to use one of the following cards:
in conclusion
Under the right circumstances, you can get great deals by purchasing points and miles. I have purchased over a million points and miles through various programs over the past decade. That’s because I had an immediate use for them at the time.
If you are considering purchasing points or miles, be aware that these rewards are unlikely to be worth more than they are now. After all, depreciation is a constant. So if you are buying speculatively, your newly purchased points and miles may lose value before you can use them.
